Bets on euro zone moves boost Wall Street

Stocks rallied on Tuesday, once taking a cue from efforts by euro zone officials working to beef up the region's rescue fund to ease the debt crisis.

Major indexes rose for a third straight session, with the S&P 500 up more than 5 percent, its largest three-day percentage gain in six weeks.

The market should extend its gains if we continue to get constructive dialogue out of the euro zone as to how they intend to backstop their major financials and some of their sovereign debt issues, said Art Hogan, managing director at Lazard Capital Markets in New York.

European officials were seen considering plans to boost the size of its bailout fund and to recapitalize banks.

Stocks also got a boost as investors rebalanced their portfolios in the last days of the quarter. The wide gap in performance between equities and bonds, favoring government debt so far this quarter, may partly reverse.

Markets could remain volatile as traders closely watched headlines to track the level of commitment from governments and institutions as they work to prevent a Greek default.

The S&P materials sector was up 3.3 percent and energy stocks added 3 percent as commodity prices rallied on hopes of some movement by European officials to prevent a slide back to recession. Mining and energy shares were the top performers among the large-caps.

Copper prices jumped more than 5 percent, helped by a drop in the dollar index, while U.S. crude futures were up 4.3 percent.

In the latest economic data, U.S. consumer confidence was little changed in September and a gauge of labor market conditions deteriorated to its worst since 1983.

The S&P/Case-Shiller survey found U.S. single-family home prices were unchanged in July on a seasonally adjusted basis but the housing market showed little sign of stabilizing.

Once we get some resolution of the European sovereign debt issues we will regain focus on what's going on in our economic data stream and that hasn't been a pretty picture this past month or so, Lazard's Hogan said.